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Kenya’s real estate attracts Africa’s super-rich

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Wealthy Africans are taking a keen interest in Kenya as they look to diversify their investment to less risky asset classes. 

BY Tullah Stephen

Kenya has emerged among the top three destination for Africa’s wealthiest hunting for second homes. The country ranked third most favorite after the UK and US as a location where wealthy Africans put their money. This is as they seek to navigate the challenges characterized in other investment classes.

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According to a report by real estate consultancy firm, Knight Frank, 24 per cent of the super-rich own property in the country and plan to increase their portfolio. Nairobi, Coast and areas around Mount Kenya were listed among the top destination by the report.

“South Africa is the fourth favorite property investment location for Africa’s super-rich at nine per cent. In total, four per cent of the world’s super-rich already own property investments in Kenya led by African, North American, Europeans, and Asian HNWIs (high-net-worth individuals),” says the report.

The report notes that 59 per cent of Kenyan HNWI have also invested in real estate in the country while 27 per cent hold property interest outside the country. Respondent interview by Knight and Frank reported that 42 per cent of the Kenyan clientele increased their exposure to property investment in 2017 further indicating the confidence in the asset class. The Attitude Survey gathered responses of 500 of the world’s leading private bankers and wealth advisors who represent over 50,000 clients with combined wealth of more than USD3 trillion.

The survey revealed that affluent Kenyans own an average of 2 homes; a primary residence and second home not bought as investment. This according to report, is lower than Africa and global averages of 2.1 and 2.9 homes respectively for the super-rich.  Further, the report says 16 per cent of Kenyan wealthy class plan to purchase additional homes with the country in 2018. Only eight percent are looking to purchase homes abroad.

“The fact that Kenya is the top African investment destination of choice for HNWIs on the continent speaks volumes about the strength and growth potential of our property market,” said Ben Woodhams, managing director at Knight Frank Kenya. Mr Woodhams adds that Kenya’s diversified economy that does not rely mainly on global commodities plays a key role in attracting investors.

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Real estate, the report cites, is considered a low-risk investment and that explains why most rich people would prefer putting their money in properties. The Attitudes Survey, based on responses from almost 900 of the world’s leading private bankers and wealth advisors, established that portfolio diversification, privacy, and portfolio liquidity have equal importance amongst HNWIs in Kenya, with 53 per cent of respondents in the affirmative.

According to the report, deciding where to buy most HNWI are prioritizing, education for their children, personal security, and opportunity for lifestyle and capital appreciation. In Nairobi, Karen ranks among the top urban districts for property buyers. The area recorded rapid growth since the early 2000 with five and 10 acre plots developing into modern housing clusters with shared amenities including club houses, swimming pools and gyms.

Among the things that have made Karen popular include location, infrastructure and ambience. Houses in Karen currently, are priced between KSh80 million to 110 million. However, record prices re achieved for larger stand-alone houses with more substantial gardens.

Typically, houses currently sell for around Ksh 80 million to Ksh 110 million in Karen, although record prices are being achieved for larger stand-alone houses with more substantial gardens.

“Kenya’s HNWI are looking for long term stability such as that offered by property investment in an otherwise unpredictable market. This is coupled with decent returns real estate market has promised before.”

Over the last couple of years, the interest in Kenya’s real estate from oversees follows the growth of a mature and resilient real estate market. New business districts such as Upper Hill and tall buildings have sprung up fast. Regional and international investors have poured into Nairobi high-end and office spaces.  On overall, personal business and investment in equities, bonds, cash and precious metals account for 20 per cent and 18 percent of investments of investments by HNWIs.

Kenya’s property market has been booming. However, tough economic times slowed downed the market. Prices for residential property in Nairobi for instance, weakened 0.9 per cent in the year 2017 down from 2.1 per cent 2016. Sector analysts also report that oversupply in the market also blamed for the dropping prices.

According to Knight Frank the number of people living in Kenya worth more than USD5 million will grow by 60 per cent to more than 2000 individuals both Kenya and foreign boosting demand for luxury products.

The World Bank predicts that the country’s economy will grow up by 6.1 per cent in 2019 supported by a strong remittance inflows, resurgent tourism sector and a healthy technology industry.  All these, according to the report will fuel further growth into Kenya’s real estate market.

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